Department of Civil Service

New York State Health Insurance Program: Overpayments for Services at the Endoscopy Center of Long Island (Follow-Up Report)

In the New York State Health Insurance Program, the Department of Civil Service administers health insurance programs for active and retired State, local government and school district employees and their dependents. The primary such program is the Empire Plan, which provides services costing more than $5 billion a year.

If an Empire Plan member is treated by a medical service provider that does not participate in the Empire Plan, the Empire Plan will not reimburse the provider for its full charges. Rather, it will only reimburse a portion of these charges (generally 80 percent), and the member will have to pay the balance. However, some non-participating providers routinely waive Empire Plan membersí out-of-pocket expenses. Such a practice may constitute billing fraud, as the Empire Plan is reimbursing 80 percent of what it understands to be the providerís actual charges.

In audit 2007-S-73, we examined the billing practices of a particular non-participating provider (the Endoscopy Center of Long Island). We found that the Center was routinely waiving Empire Plan membersí out-of-pocket expenses, and as a result, was inappropriately inflating its bills to the Empire Plan. We recommended that the Empire Plan recover the inflated portion of these bills, an amount we estimated to be about $2.7 million for the six-year period we audited (about 22 percent of the total $12.4 million that the Center billed to the Empire Plan during this period). In addition, we referred the provider to the Department of Civil Service for appropriate follow-up action. When we followed up on these matters, we found that our recommendations had been implemented and the Center had become a participating provider. We estimated that, as a result of this change, the Empire Plan was saving nearly $1 million annually on its reimbursements to the Center.